Investigating the Investigation: drawing the line on reasonableness 

Dotti v State of New South Wales (Northern Sydney Local Health District) [2025] NSWPICPD 84; (15 December 2025)

Section 11A(1) of the Workers Compensation Act 1987 provides:

No compensation is payable under this Act in respect of an injury that is a psychological injury if the injury was wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer with respect to transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal of workers or provision of employment benefits to workers.

Background 

On 5 March 2024 while on secondment with the Insured the Appellant received a letter from the Executive Director, which contained three allegations of misconduct.  The allegations were based on information provided by the Appellant’s manager who then resigned from her position.  The Appellant was advised that an investigation would occur and that she was required to provide a written response to the allegations.

On 18 or 19 March 2024, the Executive Director made derogatory remarks about the Appellant’s capabilities during a meeting. The Appellant was not involved in the meeting but was advised of the comments.  The Appellant became distressed and reported the comments to the CEO and Director of People and Culture.

The Executive Director later apologised to the Appellant and also informally offered her the role of Acting Manager.  The Appellant accepted the offer and informed Human Resources that she would not pursue a formal complaint against the Executive Director.  The Appellant then applied for the permanent Manager position and following her interview was advised that she was the “preferred candidate”.

On 14 June 2024 the Appellant received a letter which enclosed the investigation report and advised that the allegations of misconduct had been substantiated and that her actions constituted serious misconduct.  On 25 June 2024 the Appellant was advised that her period as Acting Manager was complete and on 2 July 2024, she was advised that she was unsuccessful in her application for the permanent Manager Position.  The Appellant ceased work on 27 June 2024.

On the issue of injury, Member Halstead found that the predominant cause of the Appellant’s psychological injury was the misconduct investigation, the outcome and the effect on her employment.

In respect of the issue of reasonableness, the Member concluded while there had been obstacles associated with the investigation, there was no basis for it to be found to have been unreasonable.

Issues

The Appellant was granted leave to Appeal the following grounds:

1. The Member erred in finding that the Appellant’s psychological condition was predominantly caused by discipline (the complaint and misconduct investigation) and transfer (back to her substantive position at HealthShare).
2. The Member had erred in finding that the Respondent’s actions were reasonable.

Held

Ground 1: 

Acting Deputy President Sweeney held that the Member erred in relation to medical evidence when he failed to refer to a report of Dr Ho where she stated her opinion as to causation of the Appellant’s injury and instead relied on her clinical notes.  Acting Deputy President Sweeney held that while the evidence of a general practitioner’s views on causation will generally not be afforded the same weight as that of a specialist, in the present matter Dr Ho’s opinion assumed importance because of the use made of her notes in finding against the Appellant on the issue of the predominant cause of her psychological injury.

He found that the error was undoubtedly material as consideration of these notes may have resulted in a different outcome.

Acting Deputy President Sweeney did however find that it was open to the Member to draw inferences as to the causation of the Appellant’s psychological condition from the GP clinical notes. He did not accept the Appellant’s argument that it is not safe to draw an inference as to causation of the psychological injury from the notes which were brief and created for the primary purpose of treatment.  He stated that caselaw suggests caution in the use of clinical notes, particularly when the notes conflict with sworn evidence.  In the present matter, there was no sworn evidence and the Member was plainly aware of the limited forensic value of the clinical notes.

Ground 2:

Acting Deputy President Sweeney held that the Member erred in finding that employer’s disciplinary actions were reasonable.  The Appellant argued that the disciplinary process was unreasonable because no extension was given for her response to the allegations, the evidence that explained how the Appellant was authorised by her manager to engage in the activity that was deemed to be misconduct was not referred to and the fact that no statement was provided by the Appellant’s manager.

Acting Deputy President Sweeney held that while no statement was provided by the Appellant’s manager, the employer did tender its Code of Conduct, Policy for Managing Misconduct and the Investigation Report and therefore it was open for the Member to infer that the employer’s conduct was reasonable.  The Member did however fail to address the Appellant’s argument that the failure to grant an extension of time to respond to the disciplinary action was unreasonable and this failure constituted error. He also held that the Member’s failure to refer to the issue that the Respondent failed to provide or rely on a statement from the complainant constituted error.  He held that the errors deprived the Appellant of a realistic possibility of a different result on the issue of penalty and misconduct.

Implications 

This decision confirms that a Member, when dealing with the issue of reasonableness, ought to address the issue of whether a statement has been obtained from the complainant and whether it is reasonable for a disciplinary matter to be determined without a statement from the complainant. It also confirms that while clinical records can be referred to when determining causation, reference to an arguably different opinion in a medical report of the same doctor should also be taken into account, arguably with greater weight.

Should you have any queries concerning a workers compensation matter, please contact our team on either (02) 4929 9333 or (02) 8297 5900.